oversight

Aircraft Acquisition: Affordability of DOD's Investment Strategy

Published by the Government Accountability Office on 1997-09-08.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to Congressional Requesters




September 1997
                  AIRCRAFT
                  ACQUISITION
                  Affordability of DOD’s
                  Investment Strategy




GAO/NSIAD-97-88
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      National Security and
      International Affairs Division

      B-272636

      September 8, 1997

      The Honorable Duncan Hunter
      Chairman, Subcommittee on Military Procurement
      Committee on National Security
      House of Representatives

      The Honorable Curt Weldon
      Chairman, Subcommittee on Military Research and Development
      Committee on National Security
      House of Representatives

      The affordability of the Department of Defense’s (DOD) aircraft
      modernization programs has been the subject of much recent debate and
      was the primary subject of hearings held by your Committee in June 1996
      and March 1997. At those hearings, we testified that DOD’s planned
      investments in aircraft were not achievable within likely future budgets
      and appeared to be inconsistent with the existing security environment.1
      The Congressional Budget Office (CBO) expressed similar concerns.
      However, DOD continues to believe that its aircraft investment strategy will
      be affordable. Since the March 1997 hearing, we have updated our analysis
      of DOD’s aircraft investment strategy to reflect the December 1996 Selected
      Acquisition Reports. As you subsequently requested, we are issuing this
      report to assist you in your work on the fiscal year 1998 defense
      authorization bill and continuing review of the Quadrennial Defense
      Review.

      The Congress will be faced with a number of critical decisions on DOD’s
      aircraft investment strategy as the Nation proceeds in an environment of
      constrained budgets for the foreseeable future. The purpose of this report
      is to inform the Congress about the long-term implications and
      affordability of DOD’s aircraft strategy. To gain a broad understanding of
      the affordability of DOD’s aircraft investment strategy, we evaluated
      (1) DOD’s and CBO’s estimates of the annual funding needed for aircraft
      programs, as a percentage of the overall DOD budget, and compared that
      percentage to a long-term historical average percentage of the defense
      budget; (2) the potential long-term availability of funding for DOD’s planned
      aircraft procurements; and (3) DOD’s traditional approach to resolving
      funding shortfalls.


      1
       Combat Air Power: Joint Mission Assessments Needed Before Making Program and Budget Decisions
      (GAO/T-NSIAD-96-196, June 27, 1996) and Defense Aircraft Investments: Major Program Commitments
      Based on Optimistic Budget Projections (GAO/T-NSIAD-97-103, Mar. 5, 1997).



      Page 1                                       GAO/NSIAD-97-88 Defense Aircraft Investments
                   B-272636




                   The National Defense Authorization Act for Fiscal Year 1997 required DOD
                   to conduct a Quadrennial Defense Review. As part of the review, DOD
                   assessed a wide range of issues, including the defense strategy of the
                   United States and the force structure required. As a result, DOD may reduce
                   the quantities procured of some weapons programs. The details of how
                   DOD plans to implement the recommendations of the Quadrennial Defense
                   Review will not be available until the fiscal year 1999 budget is submitted
                   to the Congress. Our analysis, therefore, does not take into account the
                   potential effect of implementing the recommendations of the Quadrennial
                   Defense Review.


                   To meet its future aircraft inventory and modernization needs, DOD’s
Results in Brief   current aircraft investment strategy involves the purchase or significant
                   modification of at least 8,499 aircraft in 17 aircraft programs at a total
                   procurement2 cost of $334.8 billion (fiscal year 1997 dollars) through their
                   planned completions. DOD has maintained that its investment plans for
                   aircraft modernization are affordable within expected future defense
                   budgets. DOD had stated earlier that sufficient funds would be available for
                   its aircraft programs based on its assumptions that (1) overall defense
                   funding would begin to increase in real terms after fiscal year 2002 and
                   (2) large savings would be generated from initiatives to downsize defense
                   infrastructure and reform the acquisition process.

                   DOD’s aircraft investment strategy may be unrealistic in view of current and
                   projected budget constraints. Recent statements by DOD officials, as well
                   as congressional projections, suggest that overall defense funding will be
                   stable, at best, for the foreseeable future. The long-term impact of this
                   change on DOD’s aircraft program is not yet clear. Moreover, DOD’s planned
                   funding for the 17 aircraft programs in all but 1 year, between fiscal year
                   2000 and 2015, exceeds the long-term historical average percentage of the
                   budget devoted to aircraft purchases and, for several of those years,
                   approaches the percentages of the defense budget reached during the
                   peak Cold War spending era of the early to mid-1980s. Compounding these
                   funding difficulties is the fact that these projections are very conservative.
                   They do not allow for real program cost growth, which historically has
                   averaged at least 20 percent, nor do they allow for the procurement of
                   additional systems, although DOD is considering replacing KC-135, C-5A,
                   F-15E, F-117, EA-6B, and S-3B aircraft.


                   2
                    This report focuses on the procurement costs, in constant fiscal year 1997 dollars, that are involved in
                   the purchase of new or significantly modified aircraft. It does not address development or operation
                   and maintenance costs or the procurement costs of other aircraft modifications or spare parts.



                   Page 2                                            GAO/NSIAD-97-88 Defense Aircraft Investments
B-272636




Further, the amount and availability of savings from infrastructure
reductions and acquisition reform—two main claimed sources for
increasing procurement funding—are not clearly evident today. Our recent
reviews3 of these initiatives indicate there are unlikely to be sufficient
savings available to offset projected procurement increases. If the
additional funding and the projected savings do not materialize as planned,
DOD will face a significant imbalance between the aircraft programs’
procurement funding requirements and the resources available for those
purposes. To deal with such an imbalance, DOD may need to (1) reduce
planned aircraft funding and procurement rates; (2) reduce funding for
other procurement programs; (3) implement changes in force structure,
operations, or other areas; or (4) increase total defense funding.

DOD’s aircraft investment strategy is a “business-as-usual”
approach—adding billions of dollars to defense acquisition costs and
delaying delivery of weapon systems to the operational forces. DOD has
historically made long-term commitments to acquire weapon systems
based on optimistic procurement profiles and then significantly altered
those profiles because of insufficient funding. Our recent report4 on
weapon system production rates showed that DOD’s weapon system
acquisition strategies were often optimistic and rarely achieved. As a
result, a significant number of weapon systems were not procured at
planned rates, leading to schedule stretchouts and billions of dollars of
increased program costs. In other words, DOD often buys less than
expected at a much higher cost than expected.

To avoid or minimize affordability problems, DOD needs to bring its aircraft
investment strategy into line with more realistic, long-term projections of
overall defense funding, as well as the amount of procurement funding
expected to be available for aircraft purchases. Rather than continue its
practice of starting aircraft procurement programs that cannot be
executed as planned because of funding limitations, DOD needs to
realistically project the long-term availability of procurement funding and
then establish and adhere to an aircraft investment strategy that is
militarily justified and can be executed within that amount. Bringing
stability and realism to DOD’s acquisition plans is crucial but will not be
easy. It will require fundamental changes to a deeply entrenched


3
 Defense Infrastructure: Budget Estimates for 1996-2001 Offer Little Savings for Modernization
(GAO/NSIAD-96-131, Apr. 4, 1996) and Defense Aircraft Investments: Major Program Commitments
Based on Optimistic Budget Projections (GAO/T-NSIAD-97-103, Mar. 5, 1997).
4
 Weapons Acquisition: Better Use of Limited DOD Acquisition Funding Would Reduce Costs
(GAO/NSIAD-97-23, Feb. 13, 1997).



Page 3                                         GAO/NSIAD-97-88 Defense Aircraft Investments
             B-272636




             acquisition culture. Difficult decisions will need to be made about
             restructuring and/or terminating some programs.


             Most of the funding in DOD’s fiscal year 1997 aircraft investment strategy is
Background   for the procurement of new aircraft such as the F/A-18E/F, F-22, and Joint
             Strike Fighter (JSF), while some is for the retrofit or remanufacture of
             existing aircraft, such as the AV-8B and the Longbow Apache. Table 1
             describes the 17 aircraft programs and their estimated procurement
             funding requirements and appendix I provides details on these programs.5




             5
              Funding estimates are the total procurement funding required for the programs from fiscal year 1997
             through production completion. The estimates do not include any development or operation and
             maintenance costs.



             Page 4                                           GAO/NSIAD-97-88 Defense Aircraft Investments
                                      B-272636




Table 1: DOD’s Aircraft Procurement
Plans (1997 and beyond)               Billions of fiscal year 1997 dollars
                                                                                                                           Estimated
                                                                                                                        procurement
                                      Aircraft                         Mission/procurement type           Quantity           funding
                                      1. Joint Strike Fighter          Strike fighter/new                    2,978             $144.8
                                      2. F/A-18E/F                     Multimission tactical/new             1,000                  56.4
                                      3. F-22                          Air superiority fighter/new             438                  37.7
                                      4. V-22                          Vertical assault/new                    523                  28.4
                                      5. Comanche                      Reconnaissance and
                                                                       attack helicopter/new                 1,292                  25.2
                                      6. C-17                          Airlift and cargo/new                     80                 17.6
                                      7. Longbow Apache                Attack helicopter/
                                                                       modification                            734                   5.6
                                      8. SH-60R                        Antisubmarine and
                                                                       antisurface warfare
                                                                       helicopter/upgrade                      184                   3.8
                                      9. Joint Surveillance            Surveillance and
                                        Target Attack Radar            targeting/new
                                        System                                                                   11                  3.1
                                      10. Joint Primary Aircraft       Primary trainer/new
                                        Training System                                                        702                   2.5
                                      11. H-1                          Attack and utility
                                                                       helicopter/upgrade                      280                   2.3
                                      12. E-2C Hawkeye                 Combat information/new                    29                  2.2
                                      13. T-45 Training System         Strike pilot trainer/new                  91                  2.1
                                      14. AV-8B                        Light attack/remanufacture                56                  1.6
                                      15. UH-60L Black Hawk            Air assault/cavalry/medical
                                                                       evacuation helicopter/
                                                                       modification                              64                  0.7
                                      16. C-130J                       Airlift and cargo/new                      6                  0.4
                                                        a
                                      17. E-3 AWACS                    Airborne warning and
                                                                       control/modification                      31                  0.4
                                      Total                                                                  8,499             $334.8
                                      a
                                      Airborne Warning and Control System.

                                      Source: Our analysis of (1) DOD’s program cost estimates, except the JSF program and
                                      (2) CBO’s JSF cost estimates based on DOD’s unit cost goals and unadjusted for cost growth.



                                      DOD is pursuing these aircraft programs at a time when the federal
                                      government is likely to be faced with significant budgetary pressure for
                                      the foreseeable future. This pressure comes from efforts to balance the
                                      budget, coupled with funding demands for such programs as Social
                                      Security, Medicare, and Medicaid. Consequently, there is likely to be



                                      Page 5                                        GAO/NSIAD-97-88 Defense Aircraft Investments
                       B-272636




                       limitations on all discretionary spending, including defense spending, for
                       the long term.

                       This report addresses the availability of funding to support DOD’s aircraft
                       investment strategy as planned prior to the Quadrennial Defense Review,
                       but does not address specific aircraft requirements. Our previous reports
                       have questioned the need for and timing of a number of DOD’s aircraft
                       procurements. (A listing of prior reports is provided at the end of this
                       report.)


                       DOD asserts that its aircraft modernization programs are affordable as
Funding Needed for     planned. On June 27, 1996, DOD officials testified before House
Aircraft Procurement   Subcommittees6 that its overall aircraft investment plans were within
Programs Will Exceed   historical norms and affordable within other service priorities. The
                       officials further explained that the historical norms referred to were based
Historical Norms       on the aircraft funding experience of the early 1980s.

                       Our review indicated that using the early to mid-1980s, the peak Cold War
                       defense spending years, as a historical norm for future aircraft
                       investments is not realistic in today’s budgetary and force structure
                       environment. As shown in figure 1, DOD’s overall appropriations, expressed
                       in fiscal year 1997 dollars, have decreased significantly from their high
                       point in fiscal year 1985, and the amounts appropriated in recent years are
                       at, or near, the lowest point over the past 24 years.




                       6
                        Joint Statement of the Under Secretary of Defense for Acquisition and Technology and the Vice
                       Chairman of the Joint Chiefs of Staff before the Subcommittee on Military Research and Development
                       and the Subcommittee on Procurement of the House Committee on National Security—June 27, 1996.



                       Page 6                                         GAO/NSIAD-97-88 Defense Aircraft Investments
                                                  B-272636




Figure 1: Overall DOD Budget and Funding for Aircraft Purchases (as a percentage of the overall DOD budget)
In billions of dollars                                                                                                              In percent
400                                                                                                                                        14

                 Actual                                                        Projected
                                                                                                                                           12

300
                                                                                                                                           10


                                                                                                                                           8
200
                                                                                                                                           6


                                                                                                                                           4
100

                                                                                                                                           2


  0                                                                                                                                        0
      73    75    77     79   81   83   85   87    89      91   93   95 97 99          01   03   05   07   09   11   13   15   17   19
                                                                     Fiscal year

                                                                Total DOD Percent of
                                                                  budget    total




                                                  Source: Our analysis of DOD and CBO data.




                                                  As shown in figure 1, our review of aircraft procurement funding data from
                                                  fiscal years 1973 through 1996, showed that funding for DOD’s aircraft
                                                  purchases as a percentage of DOD’s overall budget fluctuated in relation to
                                                  the changes in DOD’s overall budget. Funding for aircraft purchases
                                                  increased significantly as DOD’s overall funding increased in the early 1980s
                                                  and decreased sharply as the defense budget decreased in the late 1980s
                                                  and early 1990s. In contrast, DOD’s planned aircraft investment strategy
                                                  does not follow this pattern and calls for significantly increased funding
                                                  for aircraft purchases during a period when DOD’s overall funding is
                                                  expected to remain stable in real terms.



                                                  Page 7                                         GAO/NSIAD-97-88 Defense Aircraft Investments
                                              B-272636




Figure 2: Funding History for DOD’s Aircraft Purchases as a Percentage of DOD’s Overall Budget

In percent              1980s Cold War buildup
8



                                                                                                     4.8% Historical average

6




4




2




0
    73   74   75   76     77   78   79   80      81    82   83    84     85    86   87   88     89   90   91    92   93   94   95   96
                                                                 Fiscal year




                                              Source: Our analysis of DOD data.




                                              Funding for DOD’s aircraft purchases was at its highest point, both in dollar
                                              terms and as a percentage of the overall DOD budget, during the early to
                                              mid-1980s. Figure 2 shows the 24-year funding history for DOD’s aircraft
                                              purchases from fiscal years 1973 through 1996. During that period, DOD
                                              spending on aircraft purchases fluctuated somewhat but averaged about
                                              4.8 percent of the overall DOD budget. From fiscal years 1982 through 1986,
                                              DOD used from 6.0 percent to 7.7 percent of its overall annual funding on
                                              aircraft purchases. In contrast, since fiscal year 1973, the next highest level
                                              of annual aircraft funding was 5.5 percent in fiscal year 1989 and, in 12




                                              Page 8                                          GAO/NSIAD-97-88 Defense Aircraft Investments
B-272636




other years, the funding was less than 4.5 percent of the overall DOD
funding. Therefore, a long-term average would be more appropriate than
early 1980’s historical norms as a benchmark for an analysis of funding
patterns, and its use would even out the high aircraft procurement funding
of the early 1980s and the lower funding of the post-Vietnam and post-Cold
War eras. However, such a benchmark should not be used as a threshold
for spending on aircraft purchases because it may not reflect the changed
nature of the defense requirements and U.S. strategy that occurred with
the end of the Cold War.

If DOD’s aircraft investment strategy is implemented as planned and the
defense budget stabilizes at DOD’s currently projected fiscal year 2003 level
(about $247 billion in constant fiscal year 1997 dollars), DOD’s projected
funding for aircraft purchases will exceed the historical average
percentage of the defense budget for aircraft purchases in all but 1 year
between fiscal year 2000 and 2015. For several years, it will approach the
highest historical percentages of the defense budget for aircraft purchases.
Those high percentages were attained during the peak Cold War spending
of the early to mid-1980s.




Page 9                               GAO/NSIAD-97-88 Defense Aircraft Investments
                                              B-272636




Figure 3: Historical Funding and Projected Funding Requirements for Aircraft Purchases as a Percentage of DOD’s Overall
Budget
In percent
8




              Actual                                                Projected
6




4




2




0
    73   75    77   79   81   83   85   87   89   91    93   95    97    99   01   03     05    07   09   11   13   15   17   19
                                                             Fiscal year




                                              Source: Our analysis of DOD and CBO data.




                                              In fiscal year 1996, DOD spent $6.8 billion, or 2.6 percent of its overall
                                              budget, on aircraft purchases. To implement its aircraft investment
                                              strategy, DOD expects to increase its annual spending on aircraft purchases
                                              significantly from current levels and to sustain those higher levels for the
                                              indefinite future. For example, as shown in figure 4, DOD’s annual spending
                                              on aircraft purchases is projected to increase about 94 percent from the
                                              fiscal year 1996 level to $13.2 billion by fiscal year 2002. Also, for 15 of the
                                              next 20 fiscal years beginning in fiscal year 1997, DOD’s projected spending
                                              for aircraft purchases is expected to equal or exceed $11.9 billion



                                              Page 10                                          GAO/NSIAD-97-88 Defense Aircraft Investments
                                                                B-272636




                                                                annually.7 For 3 years during this period, DOD’s projected annual spending
                                                                on aircraft purchases will exceed $16 billion (6.5 percent of the budget)
                                                                and for 1 of those years, it will exceed $18 billion (7.3 percent of the
                                                                budget).



Figure 4: Projected Funding Requirements for DOD’s 17 Aircraft Programs (fiscal year 1997 dollars)
In billions of dollars
20
                                                                                              18.2


                                                                                       16.6          16.4

                                                                                  15
15
                                                                           13.7                             13.8
                                                                                                                   13.5
                                       13.2                                                                                13
                                12.6          12.4                  12.4                                                         12.6
                                                           12                                                                           12.1
                         11.8
                                                      11

                   9.8                                                                                                                         9.6
10                                                                                                                                                   9.4

                                                                                                                                                           8.1    8
       7.3
             6.9




 5




 0
      97     98    99    00     01     02     03     04    05       06     07    08 09 10            11     12     13     14    15      16     17    18    19    20
                                                                                Fiscal year




                                                                Note: Funding for aircraft purchases seems to drop off after fiscal year 2010 because DOD has
                                                                not yet approved additional programs for procurement. Several aircraft requirements are under
                                                                consideration but have not yet been approved for procurement.


                                                                Source:Our analysis of (1) DOD’s program cost estimates, except the JSF program and (2) CBO’s
                                                                JSF cost estimates based on DOD’s unit cost goals and unadjusted for cost growth.




                                                                7
                                                                 Applying the historical average spending level for aircraft—4.8 percent—to DOD’s fiscal year 2003
                                                                overall budget of $247 billion equates to about $11.9 billion.



                                                                Page 11                                                         GAO/NSIAD-97-88 Defense Aircraft Investments
                        B-272636




                        In the current security and force structure environment, the need for that
                        level of additional funding has not been made clear by DOD. Furthermore,
                        other than stating that overall procurement funding in general will be
                        increased, DOD has not identified specific reductions elsewhere within the
                        procurement account or within the other major accounts to offset the
                        significant proposed increases in aircraft procurement funding. Because
                        the overall level of defense funding is expected to be stable, at best, any
                        proposed increase in spending for a particular account or for a project will
                        have to be offset elsewhere within the budget.

                        Historically, acquisition programs almost always cost more than originally
                        projected. Figure 4 is a conservative projection of DOD’s aircraft funding
                        requirements because no cost growth beyond current estimates is
                        considered. Research has shown that unanticipated cost growth has
                        averaged at least 20 percent over the life of aircraft programs. For at least
                        one current program, it appears the historical patterns will be repeated. In
                        January 1997, DOD reported that the procurement cost of the F-22 was
                        expected to increase by over 20 percent and devised significant initiatives
                        to offset that growth. We reported about this potential cost growth in
                        June 1997 and concluded that the initiatives to offset the cost growth were
                        optimistic.8

                        In addition, the projected funding requirements shown in figures 3 and 4
                        may be understated because they do not include any projected funding for
                        other aircraft programs that have not been approved for procurement. For
                        example, potential requirements exist to replace the KC-135, C-5A, F-15E,
                        F-117, EA-6B, S-3B, and other aircraft. Adding any of these requirements to
                        DOD’s aircraft investment strategy would further complicate the funding
                        problems.


                        The amount of funding likely to be available for national defense9 in the
Funding for Increased   near term has been projected by both the President and the Congress.
Procurement Is          Both have essentially agreed that the total national defense budget will not
Uncertain               increase measurably in real terms through fiscal year 2002.

                        While the Congress has not expressed its sentiments regarding the defense
                        budget beyond fiscal year 2002, last year DOD’s long-term planning for its

                        8
                         Tactical Aircraft: Restructuring of the Air Force F-22 Fighter Program (GAO/NSIAD-97-156, June 4,
                        1997).
                        9
                         The national defense budget includes the military activities of DOD, the atomic energy defense
                        activities of the Department of Energy, and the defense-related activities of other agencies.



                        Page 12                                          GAO/NSIAD-97-88 Defense Aircraft Investments
                           B-272636




                           aircraft investment strategy assumed a real annual growth factor of
                           1 percent. Accordingly, procurement funding to accomplish the aircraft
                           modernization programs was partially dependent on some level of real
                           growth in the defense budget. However, because of commitments to
                           balance the federal budget by both the President and the Congress, it
                           appears likely that the defense budget will stabilize at current levels or
                           decrease further, rather than increase as DOD’s aircraft investment plans
                           have assumed. According to DOD officials, the long-term planning now
                           assumes no real growth in the defense budget. The impact of this change
                           on DOD’s aircraft programs is not yet clear.


Uncertain Savings          DOD plans to increase overall funding for procurement programs over the
Available for Additional   next few years, and the aircraft programs are expected to be a prime
Procurement                beneficiary of that increased funding. DOD expects to increase
                           procurement spending to a level of approximately $61.2 billion per year,
                           from the current level of about $44.3 billion per year, while keeping overall
                           defense spending at current levels, at least through fiscal year 2002. Of the
                           $39.0 billion cumulative increase in procurement spending that is expected
                           through fiscal year 2002, about $17.7 billion is projected to be used for
                           DOD’s aircraft investment strategy.


                           To increase procurement funding while keeping overall defense spending
                           at current levels, DOD anticipates major savings will be generated from
                           infrastructure reductions and acquisition reform initiatives, as well as
                           increased purchasing power through significantly lower inflation
                           projections. We found, however, that there are unlikely to be sufficient
                           savings available to offset DOD’s projected procurement increases.

                           DOD’s planned procurement funding increase was partially predicated on
                           base closure savings of $17.8 billion (then-year dollars) through fiscal
                           year 2001, a component of infrastructure, and shifting this money to pay
                           for additional procurement. In 1996, however, we found no significant net
                           infrastructure savings between fiscal year 1996 and 2001 because the
                           proportion of infrastructure in the DOD budgets was projected to remain
                           relatively constant through fiscal year 2001. Therefore, through fiscal
                           year 2001, DOD will have less funds available than expected for
                           procurement from its infrastructure reform initiatives.

                           In addition, our ongoing evaluation of acquisition reform savings on major
                           weapon systems suggests that the amount of such savings that will be
                           available to increase procurement spending is uncertain. Our work shows



                           Page 13                              GAO/NSIAD-97-88 Defense Aircraft Investments
B-272636




that the savings from acquisition reform have been used by the very
programs generating the savings to fund other needs. This raises concern
as to whether the latest acquisition reform initiatives will provide savings
to realize modernization objectives for other weapons systems within the
time frames envisioned. Without the level of savings expected from
infrastructure reductions and acquisition reform, DOD will face difficult
choices in funding its modernization plans.

Finally, based on changes in future inflation factors, DOD calculated in its
1997 future years defense plan (FYDP) that its purchases of goods and
services from fiscal years 1997 through 2002 would cost about $34.7 billion
(then-year dollars) less than it had planned in its 1996 FYDP.10 The “inflation
dividend” allowed DOD to include about $19.5 billion in additional
programs in fiscal years 1997-2001 and permitted the executive branch to
reduce DOD’s projected funding by $15.2 billion over the same time period.
However, using different inflation estimates, CBO calculated the cost
reduction at only $10.3 billion, or $24.4 billion less than DOD’s estimate.
Because DOD’s projected funding was reduced by $15.2 billion, CBO’s
estimate indicates that DOD’s real purchasing power, rather than
increasing, may be reduced by about $5 billion. If true, then DOD may have
to make adjustments in its programs.

We recently raised an issue on the Air Force’s F-22 air superiority fighter
that further complicates the situation.11 In estimating the cost to produce
the F-22, the Air Force used an inflation rate of about 2.2 percent per year
for all years after 1996. However, in agreeing to restructure the F-22
program to address the recently acknowledged $15 billion (then-year
dollars) program cost increase, the Air Force and its contractors used an
inflation rate of 3.2 percent per year. Increasing the inflation rate by
1 percent added billions of dollars to the F-22 program’s estimated cost.
We are concerned that the higher inflation rates could have a significant
budgetary impact for other DOD acquisition programs. Similar increases on
other major weapon programs would add billions of dollars to the
amounts needed and further jeopardize DOD’s ability to fund its
modernization plans.




10
 Future Years Defense Program: Lower Inflation Outlook Was Most Significant Change From 1996 to
1997 Program (GAO/NSIAD-97-36, Dec. 12, 1996).
11
  F-22 Restructuring (GAO/NSIAD-97-100R, Feb. 28, 1997).



Page 14                                         GAO/NSIAD-97-88 Defense Aircraft Investments
                      B-272636




                      The basis for DOD’s projections of total annual procurement funding is the
Program Instability   cumulative annual funding needs of multiple weapons programs, each of
Causes Schedule       which has typically been based on optimistic assumptions about
Stretchouts and       procurement quantities and rates. Accordingly, DOD’s projections of total
                      annual procurement funding have been consistently optimistic. DOD’s
Higher Unit Costs     traditional approach to managing affordability problems is to reduce
                      procurement quantities and extend production schedules without
                      eliminating programs. Such actions normally result in significantly
                      increased system procurement costs and delayed deliveries to operational
                      units.

                      We recently reported that the costs for 17 of 22 full-rate production
                      systems we reviewed increased by $10 billion (fiscal year 1996 dollars)
                      beyond original estimates through fiscal year 1996 due to stretching out
                      the completion of the weapons’ production.12 We found that DOD had
                      inappropriately placed a high priority on buying large numbers of untested
                      weapons during low-rate initial production to ensure commitment to new
                      programs and thus had to cut by more than half its planned full-rate
                      production for many weapons that had already been tested. We also found
                      that actual production rates were, on average, less than half of originally
                      planned rates. Primarily because of funding limitations, DOD has reduced
                      the annual full-rate production for 17 of the 22 proven weapons reviewed,
                      stretching out the completion of the weapons’ production an average of
                      8 years (or 170 percent) longer than planned. Our work showed that DOD
                      develops weapon system acquisition strategies that are based on
                      optimistic projections of funding that are rarely achieved. As a result, a
                      significant number of DOD’s weapon systems are not being procured at
                      planned production rates, leading to program stretchouts and billions of
                      dollars of increased costs. If DOD bought weapons at minimum rates during
                      low-rate initial production, more funds would be available to buy proven
                      weapons in full-rate production at more efficient rates and at lower costs.

                      If DOD’s assumptions regarding future spending for its aircraft programs do
                      not materialize, DOD may need to (1) reduce funding for some or all of the
                      aircraft programs; (2) reduce funding for other procurement programs;
                      (3) implement changes in infrastructure, operations, or other areas; or
                      (4) increase overall defense funding. In other words, the likelihood of
                      program stretchouts and significantly increased costs is very real.




                      12
                       Weapons Acquisition: Better Use of Limited DOD Acquisition Funding Would Reduce Costs
                      (GAO/NSIAD-97-23, Feb. 13, 1997).



                      Page 15                                       GAO/NSIAD-97-88 Defense Aircraft Investments
                  B-272636




                  As the Nation proceeds into the 21st century faced with the prospect of a
Conclusions and   constrained budget, we believe DOD needs to take action now to address
Recommendations   looming affordability problems with its aircraft investment strategy.
                  Action needs to be taken now because, if major commitments are made to
                  the initial procurement of all the planned aircraft programs (such as the
                  F/A-18E/F, F-22, JSF, and the V-22) over the next several years, a significant
                  imbalance is likely to result between funding requirements and available
                  funding. Such imbalances have historically led to program stretchouts,
                  higher unit costs, and delayed deliveries to operational units. Further, this
                  imbalance may be long-term in nature, restricting DOD’s ability to respond
                  to other funding requirements.

                  DOD needs to reorient its aircraft investment strategy to recognize the
                  reality of a constrained overall defense budget for the foreseeable future.
                  Accordingly, instead of continuing to start aircraft procurement programs
                  that are based on optimistic assumptions about available funds, DOD
                  should determine how much procurement funding can realistically be
                  expected and structure its aircraft investment strategy within those levels.
                  DOD also needs to provide more concrete and lasting assurance that its
                  aircraft procurement programs are not only militarily justified in the
                  current security environment but clearly affordable as planned throughout
                  their entire procurement. The key to ensuring the efficient production of
                  systems is program stability. Understated cost estimates and overly
                  optimistic funding assumptions result in too many programs chasing too
                  few dollars.

                  We believe that bringing realism to DOD’s acquisition plans will require very
                  difficult decisions because programs will have to be terminated. While all
                  involved may agree that there are too many programs chasing too few
                  dollars, and could probably agree on the need to bring stability and
                  executability to those programs that are pursued, it will be much more
                  difficult to agree on which programs to cut. Nevertheless, the likelihood of
                  continuing fiscal constraints and reduced national security threats should
                  provide additional incentives for real progress in changing the structure
                  and dominant culture of DOD’s weapon system acquisition process.

                  Therefore, we recommend that the Secretary of Defense, in close
                  consultation with the defense and budget committees of the Congress,
                  define realistic, long-term projections of overall defense funding and,
                  within those amounts, the portion of the annual procurement funding that
                  can be expected to be made available to purchase new or significantly
                  improved aircraft. In developing the projections, the Secretary should



                  Page 16                              GAO/NSIAD-97-88 Defense Aircraft Investments
                     B-272636




                     consider whether the historical average percentage of the total budget for
                     aircraft purchases is appropriate in today’s security and budgetary
                     environment.

                     We also recommend that the Secretary reassess and report to the
                     Congress on the overall affordability of DOD’s aircraft investment strategy
                     in light of the funding that is expected to be available. The Secretary
                     should clearly identify the amount of funding required by source, including
                     (1) any projected savings from infrastructure and acquisition reform
                     initiatives and (2) any reductions elsewhere within the procurement
                     account or within the other major accounts.

                     We further recommend that the Secretary fully consider the availability of
                     long-term funding for any aircraft program before approving the
                     procurement planned for that system.


                     In commenting on a draft of this report, DOD partially concurred with our
Agency Comments      recommendations and stated that it is fully aware of the investment
and Our Evaluation   challenge highlighted in this report. DOD stated that its recent Quadrennial
                     Defense Review addressed the affordability of the modernization
                     programs that it believes are needed to meet the requirements of the
                     defense strategy. The Quadrennial Defense Review recommended
                     reductions in aircraft procurement plans. However, even to modernize the
                     slightly smaller force that will result from the Quadrennial Defense
                     Review, DOD believes that procurement funding must also rise to about
                     $60 billion annually by fiscal year 2001, from about $44 billion in fiscal
                     year 1997. Recognizing that overall defense budgets are not likely to
                     increase substantially for the foreseeable future, DOD indicated that the
                     additional procurement funds would be created by continuing efforts to
                     reduce the costs of defense infrastructure and to fundamentally reengineer
                     its business practices.

                     Our recent reviews of DOD’s previous initiatives to reduce the costs of
                     defense infrastructure and reengineer business practices indicate that the
                     amount and availability of savings from such initiatives may be
                     substantially less than DOD has estimated. If the projected savings do not
                     materialize as planned, or if estimates of the procurement costs of weapon
                     systems prove to be too optimistic, DOD will need to rebalance the
                     procurement plans to match the available resources. This action would
                     likely result in further program adjustments and extensions.




                     Page 17                             GAO/NSIAD-97-88 Defense Aircraft Investments
              B-272636




              Concerning aircraft procurement projections, we continue to believe that
              a clearer understanding of DOD’s long-term budgetary
              assumptions—including specific, realistic projections of funding
              availability and planned aircraft procurement spending—is necessary to
              determine the overall affordability of DOD’s aircraft investment strategy.
              Without this information, neither DOD nor the Congress will have
              reasonable assurances that the long-term affordability of near-term
              procurement decisions has been adequately considered.


              We gathered, assembled, and analyzed historical data on the overall
Scope and     defense budget, the services’ budget shares, the procurement budgets, and
Methodology   the aircraft procurement budgets. Much of this data was derived from
              DOD’s historical FYDP databases. We did not establish the reliability of this
              data because the FYDP is the most comprehensive and continuous source
              of current and historical defense resource data. The FYDP is used
              extensively for analytical purposes and for making programming and
              budgeting decisions at all DOD management levels. In addition, we
              reviewed historical information and studies—ours, CBO, and others—on
              program financing and affordability. We also gathered, assembled, and
              analyzed DOD-generated data on its aircraft programs and supplemented
              that, where necessary, with data from CBO. We reviewed DOD’s detailed
              positions on the affordability of its aircraft modernization programs, as
              presented to the Congress in a June 1996 hearing. We followed up with
              DOD and service officials on key aspects of that position.


              Our analysis included tactical aircraft, bombers, transports, helicopters,
              other aircraft purchases and major aircraft modification programs. This
              approach removes any cyclical effects on the investment in aircraft by
              allowing us to view the overall amount invested, as well as the major
              subcomponents of that investment. We focused on procurement figures
              and excluded research and development costs because we could not
              forecast what development programs DOD will undertake over the course
              of the next 20 to 30 years. We used DOD’s projections for the costs of these
              aircraft programs (except for the JSF costs, which are CBO projections
              based on DOD unit cost goals) and did not project cost increases, even
              though cost increases have occurred in almost all previous aircraft
              procurement programs. All dollar figures are in constant 1997 dollars,
              unless otherwise noted.

              The National Defense Authorization Act for Fiscal Year 1997 required DOD
              to conduct a Quadrennial Defense Review. As part of the review, DOD



              Page 18                              GAO/NSIAD-97-88 Defense Aircraft Investments
B-272636




assessed a wide range of issues, including the defense strategy of the
United States and the force structure required. As a result, DOD may reduce
the quantities procured of some weapons programs. The details of how
DOD plans to implement the recommendations of the Quadrennial Defense
Review will not be available until the fiscal year 1999 budget is submitted
to the Congress. Our analysis, therefore, does not take into account the
potential effect of implementing the recommendations of the Quadrennial
Defense Review.

We performed our work from March 1996 to July 1997 in accordance with
generally accepted government auditing standards.


As agreed with your offices, we plan no further distribution of this report
until 30 days from its issue date unless you publicly announce its contents
earlier. At that time, we will send copies to other congressional
committees; the Secretaries of Defense, the Army, the Navy, and the Air
Force; the Commandant of the Marine Corps; the Director, Office of
Management and Budget; and other interested parties. We will also make
copies available to others upon request.

Please contact me at (202) 512-4841 if you or your staff have any questions
concerning this report. Major contributors to this report are listed in
appendix III.




Louis J. Rodrigues
Director, Defense Acquisitions Issues




Page 19                             GAO/NSIAD-97-88 Defense Aircraft Investments
Contents



Letter                                                                                              1


Appendix I                                                                                         22

Descriptions of
Planned Aircraft
Acquisitions
Appendix II                                                                                        24

Comments From the
Department of
Defense
Appendix III                                                                                       31

Major Contributors to
This Report
Related GAO Products                                                                               35


Table                   Table 1: DOD’s Aircraft Procurement Plans                                   5


Figures                 Figure 1: Overall DOD Budget and Funding for Aircraft Purchases             7
                        Figure 2: Funding History for DOD’s Aircraft Purchases as a                 8
                          Percentage of DOD’s Overall Budget
                        Figure 3: Historical Funding and Projected Funding                         10
                          Requirements for Aircraft Purchases as a Percentage of DOD’s
                          Overall Budget
                        Figure 4: Projected Funding Requirements for DOD’s 17 Aircraft             11
                          Programs




                        Abbreviations

                        CBO       Congressional Budget Office
                        DOD       Department of Defense
                        FYDP      future years defense plan
                        JSF       Joint Strike Fighter


                        Page 20                           GAO/NSIAD-97-88 Defense Aircraft Investments
Page 21   GAO/NSIAD-97-88 Defense Aircraft Investments
Appendix I

Descriptions of Planned Aircraft
Acquisitions


Aircraft                             Description
AV-8B                                Marine Corps aircraft. A single-piloted, light-attack, vertical/short take-off and landing
                                     aircraft used primarily for responsive close air support. This is a remanufacture program
                                     that converts older versions to the most recent production version and provides night
                                     fighting capability.
C-17                                 Air Force aircraft. A new production aircraft that modernizes the airlift fleet. It will
                                     augment the C-5, C-141, and C-130 aircraft; carry outsize cargo into austere airfields;
                                     and introduce a direct deployment capability.
Comanche                             Army helicopter. A new production, 24-hour, all-weather, survivable aerial
                                     reconnaissance helicopter to replace the AH-1, OH-6, and OH-58A/C helicopters and
                                     complement the AH-64 Apache. A little more than one-third of the total production
                                     aircraft will be equipped with Longbow capability.
C-130J                               Air Force aircraft. A new production, medium-range, tactical airlift aircraft designed
                                     primarily for transport of cargo and personnel within a theater of operations. This model
                                     uses latest technology to reduce life-cycle costs and has more modern displays, digital
                                     avionics, computerized aircraft functions, fewer crew members, and improved cargo
                                     handling and delivery systems.
E-2C Hawkeye                         Navy aircraft. A new production, all-weather, carrier-based airborne Combat Information
                                     Center providing tactical early warning, surveillance, intercept, search and rescue,
                                     communications relay, and strike and air traffic control.
E-3 AWACS Radar System Improvement   Air Force aircraft. A major modification to provide the Air Combat Command with new
Program                              and improved capabilities for the AWACS radar. It involves both hardware and software
                                     changes to the AWACS.
F-22                                 Air Force aircraft. A new production, next-generation stealthy air superiority fighter with
                                     first-look, first-kill capability against multiple targets. It will replace the F-15C aircraft in
                                     the air superiority role.
F/A-18E/F                            Navy aircraft. A new-production, major model upgrade to the F/A-18C/D multimission
                                     tactical aircraft for Navy fighter escort, interdiction, fleet air defense, and close-air
                                     support mission requirements. Planned enhancements over the F/A-18C/D include
                                     increased range, improved survivability, and improved carrier suitability. It will replace
                                     F/A-18C/D models, A-6, and F-14 aircraft.
H-1                                  Marine Corps helicopter. An upgrade to the Marine Corps AH-1W attack and UH-1N
                                     utility versions of this helicopter to convert both versions from 2-bladed to 4-bladed rotor
                                     systems and provide the attack version with fully integrated cockpits. The attack version
                                     provides close air support, anti-armor, armed escort, armed/visual reconnaissance and
                                     fire support coordination under day/night and adverse weather conditions. The utility
                                     version provides day/night and adverse weather command and control, combat assault
                                     support, and aeromedical evacuation.
Joint STARS                          Air Force and Army aircraft. (Joint Surveillance Target Attack Radar System) A new
                                     production joint surveillance, battle management and targeting radar system on a
                                     modified E-8 aircraft that performs real time detection and tracking of enemy ground
                                     targets.
Joint Strike Fighter                 Air Force and Navy aircraft. A new production, next-generation, multimission strike
                                     fighter. It will replace the Air Force’s F-16 and A-10, the Marine Corps’ AV-8B and
                                     F-18A/C/Ds, and be a “first-day survivable complement” to the Navy’s F-18 C/D and E/F
                                     aircraft.
                                                                                                                          (continued)




                                     Page 22                                        GAO/NSIAD-97-88 Defense Aircraft Investments
                       Appendix I
                       Descriptions of Planned Aircraft
                       Acquisitions




Aircraft               Description
JPATS                  Air Force and Navy aircraft. (Joint Primary Aircraft Training System) A new production
                       joint training aircraft and ground based training system, including simulators, that
                       replaces the Air Force T-37B trainer aircraft, Navy T-34C trainer aircraft, and their
                       associated ground systems.
Longbow Apache         Army helicopter. A modification program to develop and provide weapons
                       enhancements to the AH-64 Apache attack helicopter. The Longbow program will
                       provide a fire-and-forget Hellfire missile capability to the AH-64 Apache helicopter that
                       can operate in night, all-weather, and countermeasures environments.
SH-60R                 Navy helicopter. A Block II weapon systems upgrade of the Navy version of the Army
                       Black Hawk to enhance mission areas performance. It is a twin-engine medium lift, utility
                       or assault helicopter performing anti-submarine warfare, search and rescue, anti-ship
                       warfare, cargo lift, and special operations.
T-45 Training System   Navy aircraft. A strike pilot training system to replace the T-2C and TA-4J for strike and
                       E2 and C2 pilots. It includes the T-45A aircraft, simulators, and training equipment and
                       materials.
UH-60L Black Hawk      Army helicopter. A new production, twin-engine air assault, air cavalry, and
                       aeromedical evacuation helicopter that transports up to 14 troops and equipment into
                       battle. It continues to replace the UH-1H Iroquois helicopter.
V-22                   Navy, Marine Corps, and Air Force aircraft. A new production, tilt-rotor, vertical
                       take-off, and landing aircraft designed to provide amphibious and vertical assault
                       capability to the Marine Corps and replace or supplement troop carrier and cargo
                       helicopters in the Marines, the Air Force, and the Navy.

                       Source: DOD Selected Acquisition Reports.




                       Page 23                                     GAO/NSIAD-97-88 Defense Aircraft Investments
Appendix II

Comments From the Department of Defense


Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.




See comment 1.




                             Page 24   GAO/NSIAD-97-88 Defense Aircraft Investments
                 Appendix II
                 Comments From the Department of Defense




See comment 2.




See comment 3.




See comment 4.




                 Page 25                                   GAO/NSIAD-97-88 Defense Aircraft Investments
Appendix II
Comments From the Department of Defense




Page 26                                   GAO/NSIAD-97-88 Defense Aircraft Investments
                 Appendix II
                 Comments From the Department of Defense




Now on p. 16.




See comment 2.




Now on p. 17.




See comment 2.




                 Page 27                                   GAO/NSIAD-97-88 Defense Aircraft Investments
                 Appendix II
                 Comments From the Department of Defense




Now on p. 17.




See comment 5.




                 Page 28                                   GAO/NSIAD-97-88 Defense Aircraft Investments
               Appendix II
               Comments From the Department of Defense




               The following are our comments on the Department of Defense’s (DOD)
GAO Comments   letter dated June 8, 1997.

               1. Although the Quadrennial Defense Review report recommended that
               adjustments be made to the number of aircraft to be procured and the
               rates at which they are to be procured, the report projected that additional
               procurement funding would be made available through base closures and
               other initiatives to reduce defense infrastructure and reengineer business
               practices. The details of these initiatives are not expected to be available
               until the fiscal year 1999 budget is submitted to the Congress. At this time,
               the availability of savings from planned initiatives is not clearly evident.

               2. The Quadrennial Defense Review does not provide sufficiently detailed
               projections to judge the affordability of DOD’s new aircraft procurement
               plans by comparing the long-term funding expected to be available with
               the funding needed to fully implement those plans. We continue to believe
               that this type of long-term projection is needed by both DOD and the
               Congress to ensure that DOD’s aircraft procurement programs are clearly
               affordable as planned through the span of procurement.

               3. We continue to believe that the $17 billion increased cost of procuring
               F/18-E/F aircraft compared to F/A-18C/Ds is not warranted by the limited
               increases in performance that would be obtained. We recognize that, while
               the F/A-18E/F will provide some improvements over the F/A-18C/D, most
               notably in range, the F/A-18C/D’s current capabilities are adequate to
               accomplish its assigned missions. Our rebuttals to DOD’s specific comment
               are contained in our report, Naval Aviation: F/A-18E/F Will Provide
               Marginal Operational Improvement at High Cost (GAO/NSIAD-96-98, June 18,
               1996).

               4. Although procurement rates for F-22s during the planned low-rate initial
               production period were to be lowered in accordance with the Quadrennial
               Defense Review report, we continue to believe that the degree of overlap
               between development and production of the F-22 is high and that
               procurement of F-22s should be minimized until the aircraft demonstrates
               that it can successfully meet the established performance requirements
               during operational testing and evaluation. There has also been
               congressional concern about the cost and progress of the F-22 program.
               The Senate has initiated legislation to require us to review the F-22
               development program annually.




               Page 29                                   GAO/NSIAD-97-88 Defense Aircraft Investments
Appendix II
Comments From the Department of Defense




5. We clarified the language in the report to more explicitly recommend
that long-term projections of the availability of funds should be used as a
guide to assess the likely availability of funds to carry out a program at the
time of the procurement approval decision. The Quadrennial Defense
Review recognized that more procurement dollars were being planned to
be spent than were likely to be available over the long term. Our intent in
making this recommendation is to recognize the difficulty DOD and the
Congress face and to suggest some solid analysis that would aid in
evaluating the long-term commitments that are inherent in nearer term
decisions to procure weapon systems. A better understanding of the
long-term budgetary assumptions underlying near-term decisions would
clearly aid both DOD and the Congress in ensuring that needed weapon
systems are affordable in both the near and long term.




Page 30                                   GAO/NSIAD-97-88 Defense Aircraft Investments
Appendix III

Major Contributors to This Report


                        David E. Cooper, Associate Director
National Security and   Robert D. Murphy, Assistant Director
International Affairs   William R. Graveline, Evaluator-in-Charge
Division, Washington,   David B. Best, Senior Evaluator
                        Charles R. Climpson, Senior Evaluator
D.C.




                        Page 31                            GAO/NSIAD-97-88 Defense Aircraft Investments
Appendix III
Major Contributors to This Report




Page 32                             GAO/NSIAD-97-88 Defense Aircraft Investments
Appendix III
Major Contributors to This Report




Page 33                             GAO/NSIAD-97-88 Defense Aircraft Investments
Appendix III
Major Contributors to This Report




Page 34                             GAO/NSIAD-97-88 Defense Aircraft Investments
Related GAO Products


              Combat Air Power: Joint Assessment of Air Superiority Can Be Improved
              (GAO/NSIAD-97-77, Feb. 26, 1997).

              B-2 Bomber: Status of Efforts to Acquire 21 Operational Aircraft
              (GAO/NSIAD-97-11, Oct. 22, 1996).

              Air Force Bombers: Options to Retire or Restructure the Force Would
              Reduce Planned Spending (GAO/NSIAD-96-192, Sept. 30, 1996).

              U.S. Combat Air Power: Aging Refueling Aircraft Are Costly to Maintain
              and Operate (GAO/NSIAD-96-160, Aug. 8, 1996).

              Combat Air Power: Assessment of Joint Close Support Requirements and
              Capabilities Is Needed (GAO/NSIAD-96-45, June 28, 1996).

              U.S. Combat Air Power: Reassessing Plans to Modernize Interdiction
              Capabilities Could Save Billions (GAO/NSIAD-96-72, May 13, 1996).

              Combat Air Power: Funding Priority for Suppression of Enemy Air
              Defenses May Be Too Low (GAO/NSIAD-96-128, Apr. 10, 1996).

              Navy Aviation: AV-8B Harrier Remanufacture Strategy Is Not the Most
              Cost-Effective Option (GAO/NSIAD-96-49, Feb. 27, 1996).

              Future Years Defense Program: 1996 Program Is Considerably Different
              From the 1995 Program (GAO/NSIAD-95-213, Sept. 15, 1995).

              Aircraft Requirements: Air Force and Navy Need to Establish Realistic
              Criteria for Backup Aircraft (GAO/NSIAD-95-180, Sept. 29, 1995).

              Longbow Apache Helicopter: System Procurement Issues Need to Be
              Resolved (GAO/NSIAD-95-159, Aug. 24 1995).

              Comanche Helicopter: Testing Needs to Be Completed Prior to Production
              Decisions (GAO/NSIAD-95-112, May 18, 1995).

              Cruise Missiles: Proven Capability Should Affect Aircraft and Force
              Structure Requirements (GAO/NSIAD-95-116, Apr. 20, 1995).

              Army Aviation: Modernization Strategy Needs to Be Reassessed
              (GAO/NSIAD-95-9, Nov. 21, 1994).




              Page 35                             GAO/NSIAD-97-88 Defense Aircraft Investments
           Related GAO Products




           Future Years Defense Program: Optimistic Estimates Lead to Billions in
           Overprogramming (GAO/NSIAD-94-210, July 29, 1994).

           Continental Air Defense: A Dedicated Force Is No Longer Needed
           (GAO/NSIAD-94-76, May 3, 1994).




(707240)   Page 36                            GAO/NSIAD-97-88 Defense Aircraft Investments
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information on
how to obtain these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov




PRINTED ON    RECYCLED PAPER
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. G100
Official Business
Penalty for Private Use $300

Address Correction Requested